Cryptography a complex method of encrypting, decrypting data, is used by various applications. Most of us don’t even know about it, all we know is that, encrypted data is secure and only the intended recipient can view it.
But do you know, Blockchain the most popular technology of modern day, too utilizes cryptography due to which it is considered secure. With help of cryptography, Blockchain protects users identities, ensures safe transactions by securing all information and storage of value. When we talk about information security, Blockchain technology can be majorly divided into two parts: hashing and digital signatures.
Today, we will explain about these two functions and how they ensure security. Hope this will help you understand Blockchain technology more clearly.
Hashing is the process of generating finite amount of output data from infinite amount of input data. This input data is not constrained to any type or size and therefore offers various possibilities. In accordance to this, there are number of hashing algorithms available that can be chosen according to the requirement.
Hashes are extensively used for various types of applications. One of the most popular and commonly used is known as digital fingerprinting. It verifies and confirms that the output produced from hashing has not been meddled.
For this, calculations are used that confirm that the hashes match to the original hash. If a mismatch is detected it means the output has been tampered with. This process is used in Blockchain technology to provide tampering proof transactions.
A genesis block that captures all the data is used for a new Blockchain, thus reflecting the current state of Blockchain in form of output and as the transactions take place they are added to the chain. Each new block has the information of the previous one block. This means if any modification is made to a block the hash is altered thus making it easy to detect that some changes have been made.
SHA-256 is the common hash function used on Blockchain, this means any output that comes out of a Blockchain using SHA-256 will have 256 bits representing its state at any time. Failure of which means output is compromised.
In simple words, we can say hashing is a primary cryptographic method used in Blockchain technology. It is used to protect data and its integrity, as it divides large chunk of data into smaller units, making it difficult to imitate.
Hashing involves four main processes:
- verifying and validating account balances of wallets.
- encoding wallet addresses.
- encoding transactions between wallets.
- making block mining possible by creating mathematical puzzle that are required to solve to get a block.
Digital signatures may be based on asymmetric cryptography and it generates two mathematically linked keys: private and public.
To use digital signatures, software needs to be designed with signing capabilities, as only then hash of an electronic data can be generated that needs a signature.
The private key in background is used to encrypt this hash and the hashing algorithm to create a digital signature whereas the public key is shared to verify source of message by the recipient.
When such pair of keys is created by you on Blockchain it means you are now an account holder on the platform. Thus, eradicating the need of lengthy registration process and allowing you to send digitally signed transactions within the network. Using these keys, on a given account, only the authorized owner can transact.
In simple words we can say, digital signatures are no different than our own signatures, that we use to verify our identity. When we talk about digital signatures in reference to cryptocurrencies, it means mathematical functions specific for each wallet used to function as a proof to verify a wallet.
For wallet identification, cryptography uses digital signatures i.e. divided into public and private key. Public key is generally, the bank account number, whereas private key is the pin code to unlock it. It doesn’t matter if anyone knows your bank account number, because using it they can only deposit money, but if they know your pin code too then you are in trouble.
To understand, let us see the diagram below:
Public key is distributed freely and is secretly attached with private key. If a public key is known it’s fine but if the private key is disclosed then it is a problem. Therefore, private key always needs to be kept secret and secured.
Cryptography used for Blockchain technology had varied layers. The topic discussed today explains about the basic of cryptography and how it is used in Blockchain, but there is much to it. You can learn more about Blockchain technology, Bitcoin, Ethereum, neo, Cardano and other cryptocurrencies via our Systweak blog.
Both the properties discussed above: Hashing and Digital Signatures, are the foundation on which Blockchain stands. They make sure that there is no tampering been done with the transactions.
What’s important is to know and understand the connection between cryptography and Blockchain technology. Cryptography offers protection and security of data on Blockchain. Plus, it creates a trustless system as the parties don’t need to trust each other since cryptographic methods are used.
Since the occurrence of first cryptocurrency Bitcoin, cryptographic protection has always protected the data on Blockchain. Not only this, even the new upcoming cryptocurrencies too implement cryptographic methods, like quantum-proof to ensure data protection from unforeseen future threats.
Without cryptography, there could be no Bitcoin and no cryptocurrency, period.